CSRD for Beginners: A Plain-Language Guide for Small Businesses

If you’re running a small business in Europe, you’ve probably heard the term CSRD but may not be sure what it really means. The Corporate Sustainability Reporting Directive (CSRD) is an EU law that makes sustainability reporting part of normal business practice — not just something large corporations do. When you want a deeper dive, read our primer on CSRD reporting.

For many small and growing businesses (SMEs), the topic can feel overwhelming. The good news is that you don’t need a consultant or a huge team to understand the basics. This guide explains CSRD in plain language: what it is, who it affects, and what simple steps smaller companies can take to prepare.

1. What Is the CSRD?

The Corporate Sustainability Reporting Directive (Directive (EU) 2022/2464) updates and strengthens earlier EU rules on non-financial reporting. Its goal is to make companies explain, in a standardised way, how they affect people and the planet — and how sustainability affects their business.

Think of it as the EU’s way of ensuring that environmental and social responsibility are treated as seriously as financial results.

Under the CSRD, companies must publish information about:

• Environmental impacts (energy, emissions, pollution, waste)
• Social factors (employees, communities, human rights)
• Governance (ethics, transparency, risk management)

This information must be included in the company’s annual report, following detailed European Sustainability Reporting Standards (ESRS). For a friendly breakdown of those standards, see Understanding ESRS standards for SMEs.

2. Who Must Comply — and When

The CSRD does not apply to every business immediately. It follows a phased approach:

So, if your business is not listed and smaller than these thresholds, you’re not legally required to report under CSRD. But there’s still good reason to pay attention — because large clients and banks will increasingly ask for sustainability data from suppliers. Use the CSRD deadlines for SMEs timeline to see when those requests may arrive.

3. What Does CSRD Reporting Look Like?

A CSRD report covers three main areas, often called ESG:

1. Environmental

Energy use, greenhouse gas (GHG) emissions, water, waste, pollution, and resource efficiency.

2. Social

Employee well-being, diversity, training, pay equality, and respect for human rights.

3. Governance

Anti-corruption measures, ethical conduct, and how sustainability is managed at board level.

Each company must also explain:

• Its business model — how sustainability risks and opportunities affect it.
• Policies and targets — what it plans to achieve.
• Progress and results — measurable data and outcomes.

4. What If You’re a Small or Non-Listed Business?

Smaller businesses are not required to report under CSRD, but many will need to share sustainability data with their larger customers. To make this easier, the EU has introduced the Voluntary Standard for non-listed SMEs (VSME).

The VSME Standard provides two options:

• Basic Module: simple, essential metrics like energy use, workforce, and waste.
• Comprehensive Module: for SMEs working closely with banks or large corporate clients that need more detailed information.

Using VSME can help your business stay credible, save time, and avoid having to answer multiple one-off sustainability questionnaires; compare the options in VSME Basic vs Comprehensive Module.

5. Key Benefits of Starting Early

Starting early with CSRD-style reporting has clear advantages:

• Win new clients: Many tenders and supplier lists now include sustainability criteria.
• Access green finance: Banks and investors increasingly reward transparent reporting.
• Simplify future compliance: If your company grows or lists in the future, you’ll already be aligned with EU standards.
• Build trust: Sharing credible sustainability data strengthens your reputation with customers and employees.

Frequently Asked Questions

Do small businesses need to report under CSRD?

Not directly. Only large and listed companies are legally required to report. However, smaller suppliers will likely be asked to share sustainability information to support their clients’ CSRD reports.

What is the simplest way for a small company to start?

Start by using the VSME Basic Module, which includes key data on energy, waste, workforce, and governance. It’s designed specifically for small businesses and can be updated annually without expert help.

What’s the difference between CSRD and VSME?

CSRD is mandatory and uses detailed ESRS standards. VSME is voluntary, simplified, and intended for non-listed SMEs that want to align with CSRD expectations or prepare for supply-chain requests. Read more side-by-side comparisons in CSRD vs VSME: What’s the difference?.

How much time does sustainability reporting take?

For a small company starting with VSME, it typically takes 10–20 hours to collect and organise the first year of data. After that, updates are much faster — especially if you track a few indicators throughout the year.

Key Terms

• CSRD: Corporate Sustainability Reporting Directive — the EU law requiring large and listed companies to disclose sustainability data.
• VSME: Voluntary Sustainability Standard for micro, small, and medium-sized enterprises — designed by EFRAG for non-listed SMEs.
• ESRS: European Sustainability Reporting Standards — detailed guidance under CSRD.
• EFRAG: European Financial Reporting Advisory Group, developer of CSRD and VSME standards.
• Sustainability Report: A structured document describing a company’s environmental, social, and governance performance.

Conclusion

The CSRD marks a major shift in how European businesses communicate their impact. While it’s mainly aimed at large and listed companies, small businesses that engage early — using simple tools like the VSME Standard — can gain a real advantage.

With basic structure, honest data, and consistent effort, sustainability reporting becomes less about compliance and more about growth and trust.